GMAC Mortgage to halt most new lending in Massachusetts in wake of Attorney General Martha Coakley's suit

BOSTON - GMAC Mortgage, one of five banks that Attorney General Martha M. Coakley is suing over allegations they violated foreclosure laws, announced plans Friday to halt most lending in Massachusetts, citing an obligation to “manage risks and deploy capital in an appropriate manner.”

The company said it will “cease purchasing new mortgage loans in the Commonwealth of Massachusetts that are originated by correspondent lenders and wholesale brokers.

“GMAC Mortgage has taken this action because recent developments have led mortgage lending in Massachusetts to no longer be viable. The company will continue to service its existing customers and honor its contractual obligations as a servicer,” GMAC said in a prepared statement.

According to the company, GMAC has completed “745,000 borrower workouts since 2008, representing 27 percent of the loans serviced.”

Coakley’s office dismissed the bank’s concerns as an admission of improper activity.

“In order to do business in Massachusetts, GMAC has to follow the law before foreclosing on homeowners,” Coakley said in a prepared statement. “With today’s action, it appears GMAC has acknowledged it has a problem following those laws and being held accountable for doing so.”

Coakley described the lawsuit as the nation's first comprehensive legal action against the five major national banks regarding the foreclosure crisis that hobbled the country's housing market and contributed to a deep recession, impacting more than 45,000 Massachusetts homeowners. Coakley said she did not know how many homeowners were victims of the alleged deceptive practices.

The suit also names Mortgage Electronic Registration System, Inc. and its parent company MERSCORP Inc.

The complaint follows more than a year of negotiations with the banks over a 50-state settlement regarding the use of fraudulent documentation. Coakley said she had lost faith in the negotiation process, but would not rule out signing an agreement if one could be reached before the lawsuit is resolved.

Several of the banks named in the suit responded by criticizing Coakley for distracting from negotiations ongoing with states around the country and initiating what could be a lengthy legal proceeding that will delay relief for homeowners. A spokesman for Citi also denied that the bank had done anything illegal.